SaMoTer Outlook - Construction industry report
(December 2015)

ITALY: INVESTMENTS IN BUILDINGS

BUILDING INDUSTRY	2014	2015	2016	2017
RESIDENTIAL of which: - new - renovations	-3.0   -16.0 2.4	-1.3   -11.0 2.0	-0.1   -3.5 1.0	0.5   -0.4 0.8
NON-RESIDENTIAL	-5.6	-2.0	2.5	3.3
PUBLIC WORKS	-9.0	-1.4	3.0	6.0
TOTAL BUILDINGS	-4.8	-1.5	1.2	2.3

 

Italian economy resuming growth…

In the first part of 2015, the recovery by the Italian economy was slightly higher than expected, benefitting from external factors – the weak euro, falling oil prices and the ECB's monetary policy – as well as more evident signs of sharper recovery in domestic demand; expansion dynamics continued in the second half of the year, albeit at slightly more moderate rates, suggesting an estimate increase in GDP of 0.8% on an annual average basis.

Over the next two years, growth is expected to strengthen progressively, reaching 1.5% in 2017: the upturn in consumption and investment, which should also help the expansion direction in budgetary policy, will offset the effects on Italian exports of weaker development in the international context.

 

…but investments in construction are still low

The long downturn in construction investments seems to be coming to an end but it will not be possible to avoid a further decline in average values for 2015, albeit less pronounced than in previous years. In more detail, a new setback in new housing is expected, since the recovery in this sector continues to be hindered by the need of dispose of unsold stock, while there are signs of bottoming out for non-residential buildings and public works. The decline in the residential sector was buffered thanks to fiscal incentives stimulating a favourable trend in building renovation and requalification.

The economic situation highlights a number of improvements, starting off from the distinctly positive attitude of confidence among construction companies. The recovery in the housing market has been consolidated, as suggested by the increase in residential sales and a halt to the fall in house prices. Positive signals also emerge from the public works sector, where the growth trend for tenders continued.

 

Driving role of public investment…

Even in the light of current market situation indicators, 2016 is expected to see the launch a new expansion cycle of investment in construction. The turnaround will be largely driven by better dynamics envisaged in the public investment sector, especially for public works, following the measures implemented the Government to push the development of strictly local works (school construction plan, action against hydro-geological instability) as well as those ensure broader impact, such as major infrastructure projects.

A major boost in this regard is expected from the acceleration in the utilisation of European funds linked with the flexibility clause for investments agreed at EU level. The resources made available would be used for national co-financing of EU programmes, essentially including structural funds, the trans-European transport networks and projects financed though the Investment Plan for Europe (the so-called Juncker Plan). Other expansion effects in the public works sector are expected from allowing the internal stability pact to be exceeded for local authorities.

 

…in the face of a slow recovery for housing

More support for investments is also expected from private non-residential buildings, while a scenario of more gradual recovery is confirmed for the residential sector that, despite the positive input of investments in home renovations, will continue to suffer from the weak situation for new buildings. In this latter sector, the recession is expected to end only in 2017, in a framework more conducive to a recovery in demand for housing, thanks to improvements in family incomes and advantageous credit terms.

The evolution envisaged in various areas suggests an estimated total growth in investments in buildings of 1.2% in 2016, with acceleration likely – of slightly more than 2% – in the following year.